Prices on a per-square-foot basis rose in 78 of the nation's 100 most-active housing markets, another signal that a recovery is afoot, according to the latest figures from the field.
For the most part, price-per-square-foot increases were in single digits. But several "core-based statistical areas," including formerly downtrodden places like Phoenix and Fort Myers, Fla., notched strong double-digit gains, according to data from Pro Teck Valuation Services of Waltham, Mass. (Uncle Sam defines a core-based statistical area, or CBSA, as a geographic "micropolitan" area of at least 10,000 people who are tied to the urban center by commuting.)
Price per square foot is the great equalizer when it comes to studying housing prices, because it adjusts for product mix. Median house prices are interesting, says Michael Sklarz of Collateral Analytics, which supplies Pro Teck's data. "But if you want to know how much houses are selling for, you need to know their price per square foot," he says.
That's why this column is switching horses, from quarterly reports on median prices supplied by the Federal Housing Finance Agency to Pro Teck's numbers. FHFA's data have been the basis for the Housing Scene's price columns since it began more than 30 years ago, long before Case-Shiller and other rip-and-reap reports became popular.
But the government's numbers are highly susceptible to the vagaries of the market. The FHFA has reported surges of 40 percent or more in median house prices for some metropolitan areas during reporting periods when many more higher-cost homes than usual changed hands. Likewise, sales of an unusually large number of lower-priced dwellings can distort the average on the downside.
Granted, Pro Teck's data also can show huge changes. But price per square foot "normalizes" for swings in product type and size, which presents a truer picture of the market.
Pro Teck's figures have another advantage in that they are more current than anything else available. Numbers from other indexes can be three to six months old. But Pro Teck says it catches sales data almost immediately from 850 multiple listing services nationwide. Once a deal closes, it is captured in Pro Teck's database, which is updated at least daily and culled 15 days after the end of each month.
Like the FHFA's figures -- the ones from its Mortgage Interest Rate survey of the nation's largest metro areas, not its monthly House Price Index, which is another lagging indicator -- Pro Teck's figures cover jumbo loans over the conforming loan limit. To do otherwise, as the oft-quoted House Price Index does, would be to underreport a big swath of sales, especially on the coasts.
Pro Teck's numbers also are more detailed than any others, drilling deep into ZIP codes and neighborhoods. National numbers make for great headlines, but they are absolutely worthless for buyers and sellers who need to know what's going on in their local markets.
Pro Teck's numbers are not without their drawbacks. For example, new-home sales, which tend to lead the market up and follow it down, are not fully captured. But in that savvy builders these days are listing their products on local multiple listing services -- 790 of the 9,292 current listings in the immediate Washington, D.C., area are for brand-new houses -- Pro Teck catches at least some builder sales.
Another shortcoming is that the Massachusetts company sells its data to investors, lenders and loan servicers. Government figures are preferable to those from a private company trying to make a profit from them.
That said, Pro Teck's statistics are as good as they come. Here's what the company's figures for the latest three months as of Aug. 1 tell us:
Phoenix and Fort Myers are rebounding very well, as are San Jose, Calif., and Detroit. The median price per square foot paid in the Phoenix-Mesa-Glendale CBSA rose by a whopping 31.2 percent from the same period a year ago, from $64.03 to $84.01. Interestingly, the median house price in the Phoenix CBSA was up 31.4 percent over the same period, from $118,000 to $155,000. In the Fort Myers-Cape Coral CBSA, the median square foot cost was up 19.4 percent, from $59.46 to $71.
In the San Jose-Sunnyvale-Santa Clara CBSA, the median square foot cost rose almost 19 percent, from $377.86 to $449.51. Nearly $450 a square foot is a lot to pay for a house, which is why the median house price in San Jose was $765,375 as of Aug. 1. But it's even more expensive in the neighboring CBSA of San Francisco-San Mateo-Redwood City, where the median price per square foot is $476.95, up 5.9 percent from a year earlier.
The Detroit area also is showing signs of a strong recovery. The average cost per square foot in the Detroit-Livonia-Dearborn CBSA rose 16.4 percent, from $41.54 to $48.34, while the price in Warren-Troy-Farmington Hills increased 10.3 percent, from $68.01 to $75.
Overall, square-foot prices were up by double digits in eight CBSAs. On the flip side, none of the 22 core areas that registered lower prices per square foot over the last three months saw more than an 8 percent decline. The largest slides were in Gary, Ind., down 7.8 percent, and Birmingham, Ala., at minus 6.4 percent.
For what it's worth -- and it isn't worth much -- the median price per square foot for the 100 most active markets combined was $89.75 as of Aug. 1, a 2.6 percent increase from $87.44 at the same time a year ago.